Incentive Compensation Plan
YTC WAWASAN VIDEO, INC.: INCENTIVE COMPENSATION PLAN*
On one sunny morning in mid-January 2008, Shaari Baharom and Khaled Marwan sat in a conference room at YTC Wawasan Video headquarters in Jalan Tun Razak analyzing fourth quarter 2007 results and evaluating the company's incentive compensation plan, which had been in effect for the past two quarters. Shaari, YTC’s president, and Khaled, the company's vice president of operations, were scheduled to meet with Malek Lotfi, the chairman and owner of YTC, at the end of the week to review the video chain's expansion plans for 2008 (see Exhibit 1).
EXHIBIT 1 Organization Chart of YTC Headquarters and Stores
Shaari had been with the company, previously known as Video Enterprises, since its inception in 1998 when he joined as a salesperson. When Malek acquired the company in November 2005, Shaari had risen to the position of president. Khaled had worked for Malek for six years at YTC Century Wawasan Theatres, which Malek had sold in 2005. While both men were pleased with the 2007 results and confident of their plans for the chain's future expansion, they were uneasy about the costs and the results of the incentive program that had been initiated on Malek's suggestion six months previously.
YTC's 24 stores were concentrated in the Kuala Lumpur and Petaling Jaya areas and sold or rented prerecorded videocassettes (PRCs) to consumers. The City Square store, the first and largest YTC store, and the largest PRC retail outlet in the region, epitomized the chain's strategy. It had an enormous inventory of PRCs representing a broad range of titles, presented in an attractive and carefully designed environment. After a brief period of consolidation following the acquisition, computer equipment was installed, the stores were redecorated to Malek's high standards, and YTC embarked on a store-opening spree designed to consolidate its dominant position in the Kuala Lumpur market....
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